London's Crazy Housing Market Just Broke A New Record Level, And No One Thinks It's Sustainable

London's absurd house price growth has just sent the average house price to £514,000 ($830,000), according to Office for National Statistics figures published this morning. The new number comes after price growth of 19.1% in the year to July. It's the first time the average price has spiked above half a million pounds.

Prices are now 39.7% above their pre-financial crisis peak, after an astonishing climb in recent years, even while the UK economy has been struggling.

Wales, Scotland, Northern Ireland and the north of England's housing markets are still relatively depressed, with prices below 2008 levels, widening the gap between the increasingly wealthy capital and the lagging regions.

The price to earnings ratio, a key measure of how affordable housing is, has climbed to 10.43 in inner London last year, according to the Greater London Authority. In the north east of England, the average price is only 4.98 times the typical income.

Howard Archer, the chief UK economist of research consultancy IHS Global Insight, said in a note that despite the soaring prices, "some restraint on buyer interest is expected to come from more stretched house prices to earnings ratios," which could put the brakes on further rapid acceleration.

The part about all of this that's really scary is that nobody thinks it can last in the long run. UK workers, even those in London, just don't have the income to continue buying houses at prices that are nearly 11 times their salaries. BBC economics editor Robert Peston tweeted, "To state the blinkin' obvious, that's unsustainable."